Managers in the U.S. and Europe are continuing to reduce both their net and gross exposures, now converging near their long-term lows. They are selectively selling or shorting stocks that are the most exposed to tighter restrictions, preferring value stocks instead (to position on firming real yields).
According to Xavier Morin, co-CIO and in charge of the Event Driven Equity division at Syquant Capital, dividend arbitrage is deployed in the 4 Helium equity funds. The aim of this strategy is to capture discounts on Future Dividendes SX5E while limiting market sensitivity...
L/S Equity managers have decently navigated these markets, generating small positive alpha (especially on their short positions) but their implicit stance is diverging across regions. U.S. managers detracted only marginal alpha. They maintained their modest overall exposures throughout September and further reduced them early October, keeping limited factor tilts.
Trading conditions in China have severely deteriorated. After reaching their peak by mid-February, stocks lost earlier gains
in March, on evidence of a plateauing economy and as stretched investors' positioning unwounded. Chinese markets were
then stuck in a volatile trading range until the summer when they suffered another -15% plunge.
With risk assets back to record highs, markets are currently looking for the next catalyst that would push equities higher. But with the Fed potentially signaling a looming reduction in asset purchases at the next FOMC meeting on June 16, it seems wise to remove some risk off in portfolios from a tactical standpoint.